Tags: 1%, America, Bank, BofA, Buffet, BuffetRule, Occupy, economy, flat, of, More…politics, recession, recovery, tax, taxes
Hi - I got an honours degree in Economics ( which included statistics) approx 30 years ago and realise how you can put a "spin" on anything - depending on who's paying you :-).
Economists will always disagree with each other and if reading the Professor's story - he has painted a really solid view of why the rich are so important to the economy. ie - they pay so much into the countries "coffers" and so are very important.
I dont actually disagree with that - but my - couldn't I post a complete different view with an entirely different slant on it - showing how the very rich get away with hardly paying anything ( yes i use to be an accountant as well) .
In the UK only yesterday in the news it came out many very rich philanthropist - are hardly paying any taxes in the UK - because they make us of donating large amounts of monies to charities - and so get the equivalent tax reliefs. Nothing wrong with that as some very important charities gain - but the money does not go to help the countries economy.
Its natural for human beings to have envy and jealousy - no matter how we try to control it - and so 80% of the population might be very envious of the the top 5% earning multiple millions every year. Getting the balance is so difficult and in the UK top tax of 50% as been reduced to 45% recently - to try and not frighten off all the multi millionaires to Monaco and othe tax havens.
If we lived in a totally honourable "uncorrupt" world - the professors view is correct. However the very rich - dont pay what they should be paying - because they have the means and power to get around the rules. The lower income majority simply need the support of the very rich - but similar the very rich also get "miffed" by all the "black economy" - were work is done for "cash" and no tax is ever deducted.
As an example - if i was earning say $10 million a year and was paying say 70% tax whilst the "norm" was say 30% - I would be upset. But in cold hard figures - still having over $3 million year (60k dollars a week) net - to play with is still a lot better than the guys only paying 30% on say $60k per annum - (ie his net is only like $1k per week)
The next arguement is that he is worth it - ie made millions through his own efforts and employs 1000's of people - true. But his own efforts have paid him a great reward anyway. - thank your lucky stars- and dont get greedy . Now thats then an another arguement lol
Conclusion - hindsight is brilliant after you have wasted all your money - Life is not simple- there is just no easy answers now - dont let any economists try and say there is !!!!!!
So your view, essentially, is that the government should decide how much we all deserve and should be allowed to live on, in the interest of keeping things "fair"? And those who do better are somehow doing something "wrong" and deserve to be punished? Hmm... reminds me of communism and why my parents left Russia.
There's currently a discounted tax rate on capital gains for two good reasons:
1) It encourages re-investment which creates American jobs and American growth - something we sorely need in this recovery.
2) Capital gains are generally not people's primary income, and in cases where it is it is treated as regular income and taxed at higher rates already.
I realize with Occupy and everything else it's popular to hate the rich, and agree with you that most people are simply jealous (you will never become that which you hate). And Obama's just doing his best to be populist and win the vote. But the true "1%" are the corporations, many of which pay an effective rate of 0%.
Incidentally, I'm all for tax breaks for giving to charities - study after study confirms that NGOs are more effective at getting things done than governments are. So these rich Brits are contributing to society, argueably in a more effective way. What's wrong with giving people a "vote"? Plus they tend to spend money, which does contibute to the economy. So what's the problem?
Roads and schools are funded by property taxes, government and infrastructure by sales taxes (which I'm all for increasing on the rich, if they have money to spend) but income tax simply pays the Federal Reserve (a privately-held, for-profit corporation) for the priviledge of using the money that it prints in your transactions. I'm not convinced that transferring more wealth away from potential philanthropists and investors and into the hands of the Rothschilds or their puppets in government necessarily contributes to society.
Hi - I try and look at life in general as i do when I trade currencies - I get rid if my "bias" and to look at the cold facts that I see hidden in the charts and then try and be rational. It is difficult to do and as we know we are never going to be always correct.
So to answer you first question in a civilised society in a "free world" we need some type of rules and regulations that the majority agree with. Those rules and regulations you would hope to be "fair" and accepted yet again by the majority of the population. Similar to the laws of the land - ie in the UK we dont lock people up in jail for 10 years for a minor offence like say 5 mph over the speed limit - that seems to be accepted. However commit a major crime and the consequences need to be tough - to deter and to punish.
My view on who decides whats's fair to pay in terms of taxes back to the economy - it has to be the elected government in charge of running the country - its just a shame when they dont represent the majority of the population. Surely "fairness" is helping the old and frail , the disabled, the people not so lucky in life. However that does not mean its the duty of the young, strong and very wealthy to be punished by too higher demands.
The real problem is nowadays the power of the media - they can make or break policies and the general public conception painted by the "media" generally look upon the majority of politicians in government as liars and cheats only doing something for their own gain ( thats how it is in the UK ). I have worked out that over 25 years of working in industry - I have paid over $1 million in different forms of personal taxations. The fact that my company accountants and advisors helped me to save at least 35% of what I should have paid was some compensation ( like a discount on a cash deal) but is it morally right?
I am and always will be a "capitalist" but also want free speech - "fairness" - philanthropists doing good - politicians who dont lie and decieve and most importantly the corrupt capitalists put behind bars.
The trouble is I am also a "realist" and so my requirements are not likely to happen :-)
Excellent post, and excellent points, Peter. (I especially like what you said about looking at issues as we do our trades, as unbiased as possible until you start to collect the facts.)
I think there's nothing wrong in your getting some deductions, that same elected government decided to allow those deductions for a reason, in order to stimulate certain behaviors (such as reduced taxation on capital gains to promote re-investment). You still paid in plenty despite them, and most do.
Those who hide their money abroad won't be affected much by the Buffet Rule, I suspect, as it is a mandatory 30% of amounts over $1M, and in the US we are taxed on declared income. There will always be loopholes and ways to dodge - I am not naive enough to overlook those who ultimately vote the laws into being and their track record on serving their own self-interests.In the end (both you and I) are talking about paying their "fair" share. But I think a flat, mandatory 30% tax on all amounts over $1M overlooks too many variables. I mentioned reinvestment, and capital gains typically not being the primary income (and taxed higher when they are). What about someone with a court ruling against them, or something like child support? They have less left over to "play" than someone earning the same exact amount but without those obligations. Just an example. Caring for an elderly parent? Our healthcare coverage here stinks compared to what you guys have in the UK. Amounts given to important causes, as we discussed, is another good one. Certainly people should be incentivised to do good, if they have the means to do so.
That's why I like sales tax - you pay based on your ability to spend (implying left over money), rather than strictly what is coming in, as everyone's situation is different. I don't like "flat" or "mandatory" anything, as it assumes everyone is in the same situation, and implies no exceptions. We're hovering dangerously close racial or religious persecutions of the past. Not sure if there's such a thing as wealthism ("sharpen the guillotine, François!"), but its another reason to think "us and them", divide people based on superficial things, not digging deeper.
I love your comments on the media, and agree wholeheartedly. I haven't heard one argument against the Buffet Rule. I'm not some uber-rich, tax-hating, anti-society self-serving, cash-hoarding pig, but I do see some issues with the proposed rule. I brought up a few here.
Ultimately, I will live by the rules the majority decides to adopt, sure, but let's at least have a balanced discussion of the pros and cons, make an informed decision (asking a lot, I know). Just like you and I are, but in the mainstream media. Feels like everyone is jumping on the post-Occupy populist anti-1% bandwagon, and not looking at all the facts. Us and them, fight or flight.
Incidentally, after I first wrote this post ("what is $47B in new taxes, 30% of all the top 1% combined, when the budget deficit - deficit mind you, not the budget itself - is $89B per month?"), the few figures came out a couple days later... March's deficit climbed to $197B! I think a far bigger issue to look at is how we spend, not whom to punish for being a bit more successful. We should be looking to those people for advice, so more of us can climb a big higher up the ladder.
Anyway, great chatting with ya! I love interesting conversations and thought-out opinions. :)
“I realize with Occupy and everything else it's popular to hate the rich, and agree with you that most people are simply jealous (you will never become that which you hate).”
Let me just pick up on the above statement you made Andrei . Below is a letter written to Jamie Dimon CEO of JP Morgan, he also incorrectly thinks that it’s popular to hate the rich.... PLEASE READ....
Dear Jamie Dimon,
I hope this note finds you well.
I am writing to profess my utter disbelief at how little you seem to understand the current mood of the nation. In a story at Bloomberg today, you and a handful of fellow banker and billionaire “job creators” were quoted as believing that the horrific sentiment directed toward you from virtually all corners of America had something to do with how much money you had. I’d like to take a moment to disabuse you of this foolishness.
America is different than almost every other place on earth in that its citizenry reveres the wealthy and we are raised to believe that we can all one day join the ranks of the rich. The lack of a caste system or visible rungs of society’s ladder is what separates our empire from so many fallen empires throughout history. In a nation bereft of royalty by virtue of its republican birth, the American people have done what any other resourceful people would do – we’ve created our own royalty and our royalty is the 1%. Not only do we not “hate the rich” as you and other em-bubbled plutocrats have postulated, in point of fact, we love them. We worship our rich to the point of obsession. The highest-rated television shows uniformly feature the unimaginably fabulous families of celebrities not to mention the housewives (real or otherwise) of the rich. We don’t care what color they are or what religion they practice or where in the country they live or what channel their show is on – if they’re rich, we are watching.
When Derek Jeter was toyed with by the New York Yankees when it came time for him to renew his next hundred million dollar contract, the people empathized with Derek Jeter. Sure, this disagreement essentially took place between one of the wealthiest organizations in the country and one of the wealthiest private citizens – but we rooted for Jeter to get his money. Nobody begrudged him a penny of it or wanted a piece of it or decried the fact that he was luckier than the rest of us. In the American psyche, Jeter was one of the good guys who was deservedly successful. He was one of us and an example of hard work paying off.
Likewise, when Steve Jobs died, he did so with more money than you or any of your “job alliance” buddies – ten times more than most of you, in fact. And upon his death the entire nation went into mourning. We set up makeshift shrines to his brilliance in front of Apple stores from coast to coast. His biography flew off the shelves and people bought Apple products and stock shares in his honor and in his memory. Does that strike you as the action of a populace that hates success?
No, Jamie, it is not that Americans hate successful people or the wealthy. In fact, it is just the opposite. We love the success stories in our midst and it is a distinctly American trait to believe that we can all follow in the footsteps of the elite, even though so few of us ever actually do.
So, no, we don’t hate the rich. What we hate are the predators.
What we hate are the people who we view as having found their success as a consequence of the damage their activities have done to our country. What we hate are those who take and give nothing back in the form of innovation, convenience, entertainment or scientific progress. We hate those who’ve exploited political relationships and stupidity to rake in even more of the nation’s wealth while simultaneously driving the potential for success further away from the grasp of everyone else.
Here in New York, we hated watching real estate and financial services elitists drive up the prices of everything from affordable apartments to martinis in midtown with the reckless speculation that would eventually lead to mass layoffs, rampant joblessness and the wreckage of so many retirement dreams. No one ever asked the rest of us if we minded, it just happened. I’m sure people across the country can tell similar stories.
So please, do us all a favor and come to the realization that the loathing you feel from your fellow Americans has nothing to do with your “success” or your “wealth” and it has everything to do with the fact that your wealth and success have come at a cost to the rest of us. No one wants your money or opportunities, what they want is the same chance that their parents had to attain these things for themselves. You are viewed, and rightfully so, as part of the machine that has removed this chance for many – and that is what they hate.
America hates unjustified privilege, it hates an unfair playing field and crony capitalism without the threat of bankruptcy, it hates privatized gains and socialized losses, it hates rule changes that benefit the few at the expense of the many and it hates people who have been bailed out and don’t display even the slightest bit of remorse or humbleness in the presence of so much suffering in the aftermath.
Nobody hates your right to make money, Jamie. They hate how you and certain others have made it.
Don’t be confused on this score for a moment longer.
The letter was written by a Josh Brown, I think he hit the nail on the head ;-)
Great letter, Keith... and I completely agree with everything you said, especially "we don't hate the rich, we hate the predators." So, then, does the blanket Buffet Rule punish the predators, or all the wealthy, including those who do create jobs, re-invest, or give to charity? It may well discourage all 3.
For the record, I'm not opposed to taxation nor reforming it (sorely needed); I'm just not convinced that the Buffet Rule is necessarily the way forward.
See the blow link Andrei, these are Buffet Rules that make sense to me.
I find it interesting discussing the differences between the US and the UK and Andrei and Lisa have mentioned various topics and points that we might see differently across the pond.
I dont know whether Keith ( another Brit) is like me - but I am a big US fan and over the last 20yrs have enjoyed many times spent in all areas of your country. However, as an outsider I can see many flaws in its "systems" - which I think are different to our problems in the UK.
I agree with Andrei that a "spend" tax is a good way of earning revenues for the country - especially when its structured correctly - with the most tax going on the "luxury" items and also the items deemed not so suitable for society.
I will give you an example in the UK - our health service which is free and probably the envy of many others is totally abused by certains sections of people - mainly the heavy smokers / drinkers and unfortunately the obese. Therefore our goverment quite correctly put higher taxes on cigarettes / alcohol / and unhealthy junk food. Also our fuel is like $10 a gallon - because 90% of it is tax.- so more families go for fuel efficient cars - and only the few can afford to run big "gas guzzlers"
If we can make people healthier - we dont need to spend billions on so much free health care and we all know we need to find alternative energy etc for our cars and houses etc.
America - needs to sort out so many issues with its people unfortunately. If that is government intervention so be it. Its multi millionaires and billionaires need to be taxed more - because they pay more tax in other parts of the world - 30% tax is nothing - UK as had problems dropping from 50-45%.as majority in the UK think that is favouring the rich and out of 29 Government Ministers in Parliment - 23 are multi millionaires.
I also see the "American Dream " a bit like the Forex dream - ie you can be super rich in a year. The Americans are brilliant marketiers - but there overselling as not helped- and thats why many around the World dont like the "big loud brash Yank". Please dont get me wrong - in the UK many Brits suffer with jealousy and envy and if the guy down the road can have a brand new Rolls Royce - they are more likely to vandalised it - where in the US - they would say well done you worked for it!
All countries have their problems - and yet again having guns in the US just does not help.
Lisa mentioned in her article about the guy being shot and murdered - ie in self defence and gets off free. That would just not happen in UK because of the "reasonable force" rule. In the UK even if you catch a robber in your house and he attacks you - you cannot just kill him and claim self defence. Our Problem and one in Europe is "Human Rights" and even crooks and murders seem to have more than the innocent bystander who is mugged.
Also in the UK tax dodgers do get sent to Jail - and many rich car dealers who evade VAT tax on sales of cars - can end up serving 1-3 yrs and get a criminal record. So i would have thought in the US - dont just fine tax dodgers - put the real culprits in Jail - and make them pay for it.
I am certainly not in favour of too much government intervention - a "free society" is important - but also citizens do need to abide the rule regulations laws etc - otherwise they are not helping their fellow countrymen.
As Keith mentioned in his article - people dont mind others who do well - but nobody like the real "cheats" and the "predators" who have only there own self interest in everything they do. They are not team players - and you dont want them in your society.
Finally - all countries thinks their goverments spend a waste too much of tax payers money. Unfortunately fighting loads of wars does not help any economy - its finds jobs - but for me its a shame a bit like investing heavily in the cigarette industy or fast junk food - and all these fantastic weapons seem then to be found all over the world in the wrong hands!!.
Greece was a prime example of its Goverment spending too much. I am going to google and find out about all countries around the world and see what amount per head they spend and how much they get back from the population in taxes ( per head) - that should be interesting and then we can see how we all compare. Interesting topic ;-)
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